Every nation has one mineral or economic resources endowed to it by nature. This becomes the original source of revenue for that people or nation. The resource endowment of one nation at time differs from what nature blessed the other with. In the same way, states in Nigeria have got various natural gifts that sustain them. States like, Akwa Ibom, Bayelsa, Rivers and Delta just to mention this few have petroleum products as their natural gift. In the same way, some states in the north have expanse land as their natural endowments while many others have solid minerals as their gifts from nature. Lagos do not have land enough like others, may also not have mineral or natural resources already explored but they always say that their oil is their land. This makes them guide and guard the land and enact any law that can make them maximize the proceed from the land. This single reason informed the re-introduction and amplification of the Land Use Charge (LUC) by Lagos State.
The Land Use Charge (“LUC”) is a charge imposed on the owner of the property. However, where the owner is not in possession of the property, the Land Use Charge Law (LUCL) authorizes the collecting authority to appoint the occupier, who is usually the tenant, to be assessed with and pay for the tax; the tenant is in turn authorized by the LUCL to offset such a payment, made under this Law, from monies that may be due from the tenant to the owner of the property. There is thus an indemnity in favor of the tenant/occupier against the owner. How this procedure would work in practice, especially in the light of the temperament of the Lagos land owner, is a major concern. The immediate past Lagos State Government of Babatunde Fashola administration formulated policies which were aimed at developing the state in various sectors such as health, transportation, banking and finance and more, but with emphasis being directed towards the real estate or housing. The LUC therefore has been foreseen by economists and estate surveyors and valuers to have an important and vital impact on the economy of Lagos State.
The Overall effect of the LUC on “VISION 20:2020” housing thematic area may be determined by considering the short and long run effects on rent and quality of housing that will be available in the open market. In the short-run, the incidence of LUC will cause reduction in net rent that is due to owners while the quality of housing will remain constant. However, the situation will change in the long-run. In the long-run, the incidence of the charge will be passed onto the tenant, who will most likely be unable to pay; subsequently, the quality of housing will reduce. High incidence of charge will force property owners to transfer it to the tenant, thereby causing housing units in the state that have already witnessed high occurrence of informal housing to be worse off in the long run. The LUC Law introduced repealed and replaced the Land Use Charge Law of 2001. Similar to the 2001 law, the LUC Law provides for a unified ‘Land Use Charge’ which consolidates all property and land based rates and charges payable under the Land Rates Law, Neighbourhood Improvement Charge and all Tenement Rates; and provides that such other rates shall cease to apply to any property on which land use charge has been levied. Unlike the 2001 law, the LUC Law goes a step further to repeal the Land Rates Law and Neighbourhood Improvement Charge Law, as well as the Land Use Charge Law, 2001 thereby creating what the State Government call a clearer regulatory framework for land based rates and charges within the state.
Although, the reintroduction of the LUC in Lagos earlier did not have exceptions but the following properties are now exempted from payment of Land Use Charge based on the newly reintroduced template. For instance, property owned, occupied and registered in the name of a religious body and used exclusively as a place of worship or religious education; Public cemeteries and burial grounds; unlike the 2001 law which applied to both public and private cemeteries; All palaces of recognised Obas and Chiefs of Lagos State; unlike the 2001 law, such property will lose its exempt status if it is leased to private entities for revenue generation. ‘Family compounds’, once exempted under the 2001 law, are not on the exempted properties list. The LUC Law provides that ‘owners or occupiers of a lease’ are liable to pay Land Use Charge. The law also identifies both occupiers of leases of less than 10 years and occupiers of leases of 10 years or more as liable to pay Land Use Charge. This is a notable change from the 2001 Land Use Charge Law which made this an owner liability. ‘Occupier’ is defined to include both lawful and unlawful occupiers of the whole or part of property, and only excludes lodgers (being licensees). This is why on March 25, 2018 the Lagos State Government after the reintroduction, gave landed property owners till April 14, 2018 to pay the state Land Use Charge, or risk losing the benefit of enjoying 15 per cent discount for paying the levy.
Similar to the 2001 Law, the LUC Law calculates Land Use Charge by multiplying the market value of the property (i.e. the sum of land value and building development value) by the Annual Charge Rate. Unlike the 2001 Law, market value under the LUC Law is to be determined by professional valuers appointed by the Commissioner of Finance. The LUC Law also includes a new ‘Relief Rate’ which is applied to the market value and charge rate. A General Relief Rate of 40 per cent is applied in calculation of Land Use Charge. Specific Relief Rates are also available at various rates ranging from 5 per cent (for long occupiers of property) to 100 per cent (for pensioners). Specific Relief may be applied for by disabled persons, aged persons, owners/occupiers of old properties (25 years and above), Federal and State owned property, non-profit making entities and for timely payment of Land Use Charge (within 15 days). Applications for Specific Relief are made to the Commissioner of Finance with any relevant supporting documentation. Overall, the LUC Law attempts to consolidate and simplify the calculation and collection of land charges and rates in Lagos State. The risk is that it may also have materially increased the same and this is likely to have an impact on the property market.
The Lagos State Government after the reintroduction jerked up the prices for virtually everything connected with it. For instance, the penalty for non-compliance with the provisions of the LUC Law has been increased from ₦100,000.00 to ₦250,000.00 or imprisonment for a period of 3 months. Similar to the 2001 Law, failure to pay Land Use Charge within a specific period will attract a penalty. Where Land Use Charge is not paid after 135 calendar days, the property is liable to enforcement. Unlike the 2001 law, the LUC Law also grants Lagos State the right to file and maintain a civil action against the owner or occupier of property, or their agent. The provisions of the LUC Law provides for liability for payment of Land Use Charge on the part of “(1) the owner of a property or occupier of a lease of less than 10 years” and on an “(2) occupier holding a lease of 10 years and above”. There seems to be no apparent distinction between short and long leases. This may be an error on the part of the draftsman as the drafting is unclear. Furthermore, the change in the LUC Law to extend liability for Land Use Charge to occupiers of land means that Land Use Charge is no longer identified as an ‘owner’ charge. This change is unlikely to materially affect property conveyancing in Lagos, as current market practice is for Land Use Charge to be passed through to tenants through the provisions of the lease or tenancy agreement.
An Assessment Appeal Tribunal (“the Tribunal”) has been constituted under the new Land Use Charge Law as a quasi-judicial body, established to receive and determine complaints from the public on overvaluation or exemption of their respective properties, with additional powers to adopt Alternative Dispute Resolution (ADR) mechanisms. We note that this is a laudable development which was lacking under the repealed 2001 Law. We believe that this initiative (particularly the mandatory provision in section 25(1) for parties to a dispute to submit to a confidential mediation) will aid fast and amicable resolution of LUC related disputes, as it will give room for negotiation among the contending parties. The new Land Use Charge provides that Notice of Appeal is to be given to the Tribunal, as opposed to the Commissioner for Finance under the repealed 2001 Law. We believe this provision will lead to efficiency in dealing with such as appeals. Also, any person who feels aggrieved for any reason relating either to the taxability of his/her property or the amount payable thereon is now required to deposit into the State’s Land Use Charge Account, an amount equivalent to a reduced sum of 25 per cent of the assessed annual LUC being disputed, as against the deposit of 50 per cent under the repealed 2001 Law, which was a bit too much in the circumstance when someone is contesting LUC. The penalty for contravention of the provisions of the new Land Use Charge Law has been increased to a maximum fine of Two Hundred and Fifty Thousand Naira (N250,000.00) as against One Hundred Thousand Naira (N100,000.00) applicable under the repealed 2001 Law.